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Freakonomics Blog

The Perils of Technology, iPad Edition

These days, I read a lot of books on an iPad 2 using the Kindle app. It is for the most part a very good experience, especially for recreational reading. As millions of others have noted, having an electronic device loaded up with a mini-library of e-books is especially valuable while traveling, which is when I do a lot of my reading.

The other day, on vacation with the family, I came across a pitfall. I was reading the old football novel North Dallas Forty (thanks to Henry for the suggestion, and all of you for other suggestions). It’s pretty entertaining — especially the race stuff and drug stuff. As it happened, my 9-year-old daughter was curled up beside me reading her book (The Doll People). She took at look at what I was reading. Her eyes immediately found a four-letter word.


One Man's Story of a Very Unwilling Bank

A reader we’ll call H., who’s in the rental-property business, writes in with a bizarre story about his bank. Assuming it is at least 60% true from both sides (his side and the bank’s), what are we to make of this?

My partner and I were looking to obtain a small business loan. Our banker told us that loans are very hard to obtain because banks are being very stringent. Not like we were going to shut down without a loan, but we figured it could help us grow the business. So, in an effort to build credit (and a good relationship) for our business with a major U.S. bank, my partner and I proposed to our banker that we would give him $50,000 cash to hold onto and in return, have the bank loan us $50k for 5 years. Basically we were securing the loan with cash as collateral. This way, we could prove to the bank that we are a responsible business and were hoping that after this first loan, the bank will be willing to lend to us in the future with more favorable terms.


Should We Be Searching for Dinosaur Vomit?

Yes! That’s the argument in a new Historical Biology paper called “A Call to Search for Fossilized Gastric Pellets.” Here’s the abstract:

Numerous extant carnivorous, piscivorous and insectivorous species – including birds, pinnipeds, varanid lizards and crocodiles and mammals – routinely ingest food combined with a high proportion of indigestible material that can be neither absorbed through digestion nor eliminated as faecal matter. Their solution is to egest the indigestible portion through the mouth as a gastric pellet. The status of gastric pellets in extant species is reviewed. Arguments based on phylogeny, anatomy and biomechanics strongly suggest that many extinct species, including crocodilians and pterosaurs, may also have produced gastric pellets routinely.


The Perils of Drunk Walking (Ep. 55)

In our latest Freakonomics Radio on Marketplace podcast, Stephen Dubner looks at why the first decision you make in 2012 can be riskier than you think. (Download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.)

The risks of driving drunk are well-established; it’s an incredibly dangerous thing to do, and produces massive collateral damage as well. So if you have a bit too much to drink over the holiday and think you’ll do the smart thing and walk home instead — well, that’s not so smart after all. Steve Levitt has compared the risk of drunk walking with drunk driving and found that the former can potentially pose a greater risk:


Peyton Manning for President?

In Freakonomics, we wrote about how the black-white gap in America exists not only in vital matters like education, income, and health but in seemingly trivial matters like baby names and preferences in TV shows.

With that in mind, it’s interesting to take a look at a new poll by Public Policy Polling (PDF; Yahoo! writeup) about Americans’ football preferences. The headline finding is that the Green Bay Packers are now “America’s team,” with 22 percent of respondents listing the Packers as their favorite team. (I have a feeling that winning the Super Bowl last year and going 12-0 to start this season had a little something to do with that; let’s see what the poll shows this time next year.) But PPP also asked the 700+ respondents their race, gender, and voting ideology, and it’s interesting to see how the favorability rating of individual players varies.


A Pareto-Efficient Donut

In line at the Star$$ on campus, I got to chatting with Professor C just in front of me. She ordered a latte and bought the last of the delicious Star$$ cake donuts, which I had had my eye on. When I got to the order desk, I asked the barista (actually a male, so I guess a barister!) if he had any more in back. Professor C offered to split the donut with me, and I said OK, but I insisted on giving her $1, my share of its cost. She then said she prefers one-half donut to a whole donut anyway, and so do I. She gave the barister a $1 tip. Everyone was better off—a clear Pareto improvement compared to the situation where she got the donut, and the barister and I got nothing.


Of Lags and Caps: Possible Implementations of a Brandeis Tax

Last Monday, Aaron Edlin and I published a cri de coeur op-ed in the New York Times calling for a Brandeis tax, an automatic tax that would put the brakes on income inequality. This is the third in a series of posts (the first and second posts are here and here) explaining more about our rationale and providing more details on how a Brandeis tax might be implemented. You can also listen to my hour-long interview on Connecticut Public Radio’s “Where we Live” here.

Of Lags and Caps: More Details About Possible Implementations of a Brandeis Tax
By Ian Ayres & Aaron Edlin

Remarkably of the hundreds of emails we received in reaction to our op-ed, almost no one questioned Brandeis’s idea that we can have great concentrations of wealth, or democracy but not both. People questioned other aspects of our proposal, asking questions like (1) how would it work in a world of income bunching; (2) would people still have the incentive to work hard; and (2) is it fair to have very high tax rates on the affluent.

Our last post talked about alternative potential triggers. Here we tackle some more detailed questions about implementation including how to trade off different kinds of distortions.


“Football Freakonomics”: Does Firing Your Head Coach Fix Anything?

‘Tis the season – for the firing of head coaches, that is. In the space of two weeks, three teams – the Jaguars, Chiefs, and Dolphins – canned their top man.

Allow me to make two seemingly contradictory points:

  • An NFL head coach is probably the most influential, hands-on coach in the four major sports; but:
  • Firing the head coach of a bad team probably does a lot less to improve that team than most of us think.

Our latest “Football Freakonomics” segment (video below) asks whether firing a head coach really does much to improve a team’s chances – or if it’s simply the standard move for losing organizations, meant to appease critics in the media, the stands, and even the locker room.


Is There a Rooftop Solar Bubble? And Is It About to Burst?

Government efforts to boost affordability and expectations of unsustainably high investment returns generated a booming market destined to crash.

I’m talking, of course, about the market for rooftop solar, which has grown exponentially in recent years.

Most people are aware of the government subsidies that offset 30 percent or more of the installation cost of commercial and residential rooftop solar—more than $10,000 for a typical solar home in California. Less known is that those up-front savings, as big as they are, still aren’t enough to generate the double-digit investment returns that solar promoters promise. In fact, for residential solar panels to pay for themselves over their 20-25-year lifespans, households and businesses must receive a second, hidden subsidy for their solar electricity generation that is far too high to be justified by economic fundamentals, and that cannot be sustained in the long run. In California, some residential solar electricity fetches a price nearly four times its energy value.


Calculating Santa's Workload

Philip Bump at The Atlantic attempts to answer an important question: what exactly is Santa’s Christmas Eve workload? He considered both the number of Christian children in the world and the geographic distribution of those children and reaches the following conclusion:

There are just over 526,000,000 Christian kids under the age of 14 in the world who celebrate Christmas on December 25. In other words, Santa has to deliver presents to almost 22 million kids an hour, every hour, on the night before Christmas. That’s about 365,000 kids a minute; about 6,100 a second. Totally doable.

Especially when you consider the uneven distribution of kids in the world. Santa needs to hit 22 million kids every hour. If Santa starts at the International Date Line and heads west, the first four time zones he passes barely contain that many kids waiting for presents. He’s already got three hours in the bank. Until, you know, he gets to Europe, which kind of breaks his schedule.

Bump offers a few caveats: not everyone celebrates on Dec. 25; some Christians don’t celebrate, while some non-Christians still expect a visit from Santa, etc. Overall, though, we think it’s a pretty good estimate — check out the post for detailed graphs.


Artist Resale Royalties: Do They Help or Hurt?

In America, it’s sometime said, all big trends start in California. That’s true for great things like hot tubs, the iPod, and Pinkberry. It’s also true for bad things, like tax revolts, Pinkberry, and . . . artist resale royalties.

Artist resale royalties? In a previous post, we explained how California’s law guaranteeing artists 5 percent of the profits from any later sale of their artwork has some unintended consequences. The California law helps the tiny fraction of artists fortunate enough to have their work appreciate significantly in value. But it does nothing for the 99% of artists whose work has little enduring commercial value. Not only does it not help them, it probably hurts them.


College Football Victories = Worse Grades?

Yes, at least for guys. That’s according to a new study (abstract; PDF) by University of Oregon economists Jason M. Lindo, Isaac D. Swensen, and Glen R. Waddell. Drawing on 8 years of data from nearly 30,000 Oregon students, they found that three fewer Ducks’ wins per season would increase male students’ GPA scores by roughly .02 — a relatively minor effect, truth be told, considering that three extra wins in college football is the difference between a good team and a bad one.

The authors attribute the grade drop to an increase in partying and alcohol consumption when the team wins, paired with a decrease in studying. Women also tend to drink and party more when the Ducks win, but the GPA effect wasn’t nearly as strong. So if you’re the parent of an Oregon student, you might be rooting for the Ducks to lose a little more often than they do.


“Football Freakonomics”: Tebow Timing

The following is a cross-post from NFL.com, where we’ve recently launched a Football Freakonomics Project. This segment aired before last Sunday’s Patriots-Broncos game.

One of the arguments both for and against Tim Tebow as a viable, long-term NFL starter is the idea that he should simply not be doing what he’s doing right now. Tebow’s critics say he’s getting far too much credit for his 7-1 record as a starter this season – that he’s benefiting from an unexplainable run of luck — while his supporters point to the exceptional performances he’s turned in immediately following those fortuitous bounces.

So how is a team that ranks second-to-last in passing yards, whose quarterback completes fewer than half his throws, pulling out miraculous victories week after week?


An Inequality Tax Trigger: The Brandeis Ratio Explained

On Monday, Aaron Edlin and I published a cri de coeur op-ed in the New York Times calling for a Brandeis tax, an automatic tax that would put the brakes on income inequality. This is the second in a series of posts (the first post is here) explaining more about our rationale and providing more details on how a Brandeis tax might be implemented.

An Inequality Tax Trigger
By Ian Ayres and Aaron Edlin

A central idea behind our Brandeis tax proposal was to have a tax that is triggered by increases in inequality. Our Brandeis tax does not target excessive income per se; it only caps inequality. Billionaires could double their current income without the tax kicking in — as long as the median income also doubles. The sky is the limit for the rich as long as the “rising tide lifts all boats.” Indeed, the tax gives job creators an extra reason to make sure that corporate wealth does in fact trickle down.


What to Do With Cheating Students?

I’m nearly certain that a pair of students cheated on my final exam—the probability they had so many identical answers on the multiple-choice exam is infinitesimal. If I pursue them, it takes me time, and there’s no assurance they will be found guilty. If I don’t, I’ll feel badly about giving them an undeserved grade. Even for fairly risk-averse students, cheating seems like a good idea. I doubt that most cheating is caught; and unless the penalty is very severe (expulsion) and/or the students’ costs of contesting the accusation are high, and both are very well-publicized, the incentive to cheat for students with weak consciences seems overpowering. To salve my own conscience I’ll report them, although it’s probably a waste of my time; but I doubt that reporting them will deter their future cheating or deter others very much.


A Free Market Solution (from Europe) to the Labor Problems in North American Sports

The following is a guest post by David Berri, a Professor of Economics at Southern Utah University. He is also the lead author of Stumbling on Wins, the general manager of the sports-economics blog Wages of Wins, and is a frequent contributor to the Freakonomics blog.

Soon after presents are opened on Christmas morning, the NBA – after a lengthy lockout – will finally open its 2011-12 season with a slate of five games. Although NBA fans are pleased the lockout has ended, they’d probably prefer that it had never happened. Unfortunately for fans of pro sports in North America, such disputes frequently cause games to be missed. But maybe there is a free market solution to this problem to be found in, of all places, Europe.

Although we tend to think such disputes are a contest between labor and management, frequently the real conflict – as noted in my recent posts here — is between small and large market teams. In North American sports, team revenue seems to depend on the size of the market where the team plays.


There Will Be Rich Always: Finding a New Way to Think About Income Inequality

On Monday, Aaron Edlin and I published a cri de coeur op-ed in the New York Times calling for a Brandeis tax, an automatic tax that would put the brakes on income inequality. In the next few days, Aaron and I will be publishing a series of posts explaining more about our rationale and providing more details on how a Brandeis tax might be implemented.

There Will Be Rich Always
By Ian Ayres & Aaron Edlin

In one of the more memorable lyrics from the musical Jesus Christ Superstar (based on Matthew 26:11), Jesus tells his disciples “There will be poor always.”

The same is true of the rich. There will always be a top 1 percent of income earners. But what it takes to be rich can change drastically over the course of even a single generation. In 1980, you would have had to earn at least $158,000 to be a one-percenter; but by 2006 the qualifying amount had more than doubled to $332,000. (You can produce an estimate of your own household income percentile – albeit using a different definition of income that produces a much higher 1 percent cutoff – at this wsj.com site.) The rise is not due to inflation as both these numbers are expressed in inflation-adjusted, constant 2006 dollars.


How Much Do Mood Swings Drive Business Cycles?

Every month, the Conference Board releases its consumer confidence index. Last month, confidence was up. The index is supposed to be a reading of how we feel about the current economic climate, a measurement of what Keynes referred to as our animal spirits. But while these surveys indicate how we’re reacting to the economy, they also influence it, creating a sort of self-reinforcing feedback loop. So, is the economy dictating our mood? Or is our mood dictating the economy?

A new working paper (pdf here) by Paul Beaudry, Deokwoo Nam, and Jian Wang attempts to untangle the two by asking whether (and if so how much?) mood swings drive business cycles:


Listen Carefully as Our Menu Options Have Recently Changed

Moving houses has always been like having three teeth removed without anesthetic. These days the pain is accentuated by having to wait on the phone hearing, “Please listen carefully as our menu options have recently changed.” That’s corporate-speak for, “Don’t even bother pressing zero hoping to speak to a human. That’ll just put you back at the beginning.”

My latest such adventure started with an email from the phone company (Verizon). I was told that a technician would come to hook up our new service during the time “window” of 8 a.m. to 5 p.m. If a window is an opening in a wall, then 8 am to 5 p.m. is more like the whole wall. Trying to shrink the window, I spent more than an hour on hold for one person after another who could only forward me to someone else equally unhelpful. The circular chain of authority finally snapped when the last person claimed (all this discussion is at 10 a.m. on the day itself) “We have absolutely no way to reach the technician.” And then asked “Have I provided excellent service today?”


Research Ideas From a Mexican Reader

A reader called HDT writes to say:

I live in Mexico and have often wondered why more American economists and students of economics don’t often venture down here because the country offers what seems, to me at least, a treasure trove of economic oddities that should fascinate anyone interested in how markets work.

* As Mexico is heading toward what’s likely to be the second most important election in its history, the subject of vote-buying is of particular interest if for no other reason than that it’s practiced fairly openly, especially in rural areas. I know that during the last elections, here in Yucatan, votes were being bought, in cash, for around $80. (Pigs and cows were also exchanged for votes, but I wasn’t ever able to find out what the “going rate” was for those particular transactions.) There are, of course, people employed by the major political parties who specialize in determining what votes are worth throughout the country. I imagine they’re easier to find, and talk to, than you might expect.

* There’s also the rather intriguing issue of how Mexican real estate agents determine a reasonable price for any given property they’re hoping to sell. The problem is that it’s customary to decrease the tax burden on the sale of a home by getting the buyer to lie about how much he or paid. In other words, the sales prices stated in government records are almost never accurate. Everyone knows this. And yet, properties regularly change hands and real estate agents do manage to make a living. But how?

Any takers?


"Football Freakonomics": How Advantageous Is Home-Field Advantage? And Why?

The following is a cross-post from NFL.com, where we’ve recently launched a Football Freakonomics Project.

Do home teams really have an advantage?

Absolutely. In their book Scorecasting, Toby Moscowitz and Jon Wertheim helpfully compile the percentage of home games won by teams in all the major sports. Some data sets go back further than others (MLB figures are since 1903; NFL figures are “only” from 1966, and MLS since 2002), but they are all large enough to be conclusive:

League Home Games Won
MLB 53.9%
NHL 55.7%
NFL 57.3%
NBA 60.5%
MLS 69.1%

So it’s hard to argue against the home-field advantage. In fact my Freakonomics co-author Steve Levitt once wrote an academic paper about the wisdom of betting (shh!) on home underdogs (more here).

But why does that advantage exist? There are a lot of theories to consider, including: “sleeping in your own bed” and “eating home cooking”, better familiarity with the home field/court, and crowd support.


A Twilight Opening Night Payoff Matrix

A student was interested in seeing the new Twilight movie, Breaking Dawn Part 1. And her roommate, a “Twi-Hard,” even had an extra ticket for the opening, midnight showing. The student likes seeing the vampires and werewolves occasionally, but cannot stand the continuing screams of the mostly pre-pubescent audience. She views her situation as a game with the following payoff bi-matrix:


Daron Acemoglu on Inequality

If you’re even a little bit interested in income inequality and how it matters, this Browser interview with MIT economist Daron Acemoglu is a must-read. Acemoglu explains how economists generally think about inequality:

The default position of economists is that inequality reflects the unequal human capital or productive capabilities of different workers. If you start with that premise – that what people earn is commensurate with their contribution to their employer, and also perhaps to society – then greater inequality tells you something about how people’s productivities have evolved over time. This is by no means what every economist believes, but it’s a common view. Economists have cut their teeth on inequality by looking at things like the increase in the college premium over the last 30 years in the U.S. and other economies, as well as the increase in the gap between relatively high earners – the 90th percentile of income distribution – versus the bottom 10th percentile. We’ve seen a big increase in inequality, measured in various ways, and this reflects the fact that the top people, the more educated, high earners have become more skilled. Technology has favored them, globalization has favored them, and inequality has increased for that reason.


Let's Hear About Your Favorite Football Books

On Tuesday, we shot the latest batch of our “Football Freakonomics” videos for the NFL Network.

This project has been a blast. There are a lot of people involved on the production, research, and digital sides, and they are all high-caliber and fun to work with. Our first two batches of videos were shot in Brooklyn warehouses. But on Tuesday we stepped it up, and got to work in the New York Jets’ indoor practice field out in Florham Park, N.J. (It was an off-day for the team, although there were plenty of players around doing individual workouts.)

I also ran into my old friend Nicky Dawidoff, a wonderful writer whose previous subjects range from ballplayer-spy Moe Berg to country music. He has been embedded with the Jets since summer and is writing a season-long account of the Jets that will, more broadly, be a book about the modern NFL.


The Butter Chronicles: Norway Comes Up Short

Norway is in the midst of a butter shortage. Yes, butter.

There are a few explanations: low-carb diets have been popular, and the summer of 2011 wasn’t ideal for dairy. Olav Mellingsater for CNN writes:

A rainy summer reduced the quality of animal feed, decreasing milk production in Norway this year by 20 million liters (5.3 million gallons) compared with the same period last year, the cooperative said.

Stores are currently rationing butter sales, and some entrepreneurial spirits are selling butter online at 30 times the normal cost. There are also some gray market characters emerging from the crisis. CNN reports:

Authorities detained a Russian citizen Monday who they said was trying to smuggle 90 kilograms (200 pounds) of butter from Germany into Norway. Food safety authorities then warned people not to buy butter from strangers, Norway’s TV2 reported.


A Scientific Argument for Cell-Phone Ban for Drivers

You’ve probably heard by now that the NTSB has recommended that states forbid drivers to use cell phones, whether hands-free or not. Here is a good AP article by Joan Lowy about what is known and not known about phone risk. She makes the excellent point that it’s harder to argue for a ban when highway fatalities keep falling — but that a falling death rate hardly means that cell phone use isn’t dangerous. (Off-topic but not too dissimilar: Americans are losing their taste for the death penalty, theoretically because it’s sometimes applied so haphazardly — but in truth it’s a lot easier to argue against the death penalty when the murder rate has fallen as dramatically as it has.)

In the AP article, Marcel Just of the Center for Cognitive Brain Imaging at Carnegie Mellon, puts in words why phones may cause a particular risk of distraction:

“When someone is speaking your native language, you can’t will yourself to not hear and process it. It just goes in,” Just said. Even if a driver tries to ignore the words, scientists “can see activation in the auditory cortex, in the language areas (of the brain). “

This would also explain why hearing someone else’s cell-phone chatter in public is more annoying than it ought to be.


Prohibition and the Transformation of American Food

In our latest Freakonomics Radio on Marketplace podcast, “How American Food Got Bad,” Tyler Cowen gives some specific, surprising reasons why food got so bad. (You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.)

One big historical factor: Prohibition. Restaurants that relied on alcohol sales closed their doors, often replaced by diners, soda fountains, and candy shops. This new breed of restaurant served hot dogs, hamburgers, chop suey, and what we now know as classic American fast food. We traded quality for speed and convenience. Here are some photos of that transformation, when cheap food outlets popped up to meet the demands of our growing consumer society.


What Do the NFL and Girl With the Dragon Tattoo Have in Common?

Answer:

They are both reliant on the talents of the Rooney and Mara dynasties.

The Pittsburgh Steelers are majority-owned by the Rooney family. The late Art Rooney (“the Chief”) ran the club for many years, ultimately giving way to son Dan, who has since given way to son Art Rooney II.

The New York Giants are 50 percent owned by John Mara. The late Tim Mara ran the club for many years, ultimately giving way to his son (and John’s father) Wellington; there have been a variety of other Maras involved in the team.